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Since the Depression, FHA has helped those with less than perfect credit buy homes by guaranteeing the loans.  It does not lend money but works thorough member banks.  Over the years, it has provided an alternative financing process that some sellers looked down on because it took longer. In a seller’s market, eager sellers preferred deals that could close more quickly.

In recent boom times, FHA was only called on to guarantee about 3% of all mortgages. Buyers got their loans with as little as 3.5% down and with 500 credit scores though most participating lenders required a score of 620 or more.  Sellers could contribute up to 6% of the closing costs.

The recent mortgage crisis has affected FHA dramatically.  Over the last few years, FHA suddenly has been called upon to back 30% of mortgages and 20% of refinancing deals on homes up to $729,750. In an era when many homeowners have defaulted on loans, FHA cash reserves are at the lowest since 1994 and serious losses are projected for the next five years with over 71% of the losses coming from loans already on the books.  FHA has been called upon to back not just loans on starter homes but on more costly move up homes as well.  The defaults have hit them hard.

To prevent further losses, Donovan said the new plan would force potential buyers and lenders “to put more skin in the game” which would prevent further losses and stabilize the system.

FHA rules take effect early next year, so if the new down payment and credit score requirements would make a difference as to whether you could afford to buy a home now or not, waste no time in calling Express Realty Services.

We can also you answer any questions you might have about the home buyer tax credit – $8,000 for first time buyers or $6,500 for repeat buyers.

Express Realty Services has a full stock of homes ready for immediate occupancy.  Aside from our featured listings, we have a special stock of renovated, refurbished, or remodeled homes from our sister company Express Homebuyers.